Peter Thiel warns young Americans of US real estate ‘catastrophe’ — but also sees ‘giant windfall’ for some boomers
As a co-founder of PayPal and the first outside investor in Facebook, Peter Thiel is widely recognized for his expertise in the tech world. But lately, the billionaire venture capitalist has been sounding the alarm on an entirely different sector: real estate.
During a recent interview with The Free Press, Thiel drew upon the insights of 19th-century economist Henry George to underscore the gravity of America’s real estate crisis.
“The basic Georgist obsession was real estate, and it was if you weren’t really careful, you would get runaway real estate prices, and the people who owned the real estate would make all the gains in a society,” Thiel said.
The core of the issue, Thiel explained, lies in the “extremely inelastic” nature of real estate, especially in regions with strict zoning laws.
“The dynamic ends up being that you add 10% to the population in a city, and maybe the house prices go up 50%, and maybe people’s salaries go up, but they don’t go up by 50%,” he said. “So the GDP grows, but it’s a giant windfall to the boomer homeowners and to the landlords, and it’s a massive hit to the lower middle class and to young people who can never get on the housing ladder.”
Thiel warned that this “Georgist real estate catastrophe” is playing out across many “Anglosphere countries,” including the U.S., Britain and Canada.
The surge in U.S. home prices has been nothing short of alarming. Over the past five years, the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index has climbed by over 50%.
This sharp rise in home prices creates significant challenges for prospective buyers, but renters aren’t immune to the impact either. It’s all part of the broader cost-of-living crisis gripping many Americans.
Thiel broke it down, stating, “There’s a way you could talk about inflation in terms of the prices of eggs or groceries, but that’s not that big a cost item, even for lower middle class people. The really big cost item is the rent.”
At its core, Thiel argued, the issue boils down to supply and demand.
“If you just add more people to the mix, and you’re not allowed to build new houses because of zoning laws, where it’s too expensive, where it’s too regulated and restricted, then the prices go up a lot,” he said. “And it’s this incredible wealth transfer from the young and the lower middle class to the upper middle class and the landlords and the old.”
Source link
